By Lewis Krauskopf
NEW YORK (Reuters) – Nvidia Corp’s results next week could send the U.S. stock market on its next path as investors turn their attention to the technology sector and artificial intelligence trading after an election-driven rally stalls came.
A nearly 800% run in Nvidia stock over the past two years, driven by its gold standard AI business, has propelled the semiconductor company to the top spot in the world by market value.
That weight gives Nvidia enormous influence over market benchmarks such as the S&P 500 and Nasdaq 100, while its Nov. 20 results will also be a gauge of the market’s appetite for tech stocks, AI trading and sentiment for stocks in general, investors said. .
The benchmark S&P 500 has retreated from record highs following the November 5 US election, which gave Donald Trump a second term as president and his fellow Republicans control of Congress.
Markets are “looking for direction right now,” said Garrett Melson, portfolio strategist at Natixis Investment Managers. “If those results are quite strong, that tells you there is still momentum behind that investment and that trade, and I think that helps drive risk appetite.”
Nvidia’s dominant AI position has catapulted its stock price and led to astonishing financial performance. For the third fiscal quarter, the company is expected to post net income of $18.4 billion, while revenue rose more than 80% to $33 billion, according to LSEG data.
However, after topping analysts’ earnings expectations last year, Nvidia’s surprises have become more modest: Profits rose 6% in the most recently reported quarter, LSEG data shows.
“It’s becoming increasingly difficult to meet those expectations,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Nvidia’s results cap off a mixed third-quarter earnings season for U.S. companies. The S&P 500’s earnings are on track, up 8.8% from a year earlier, with 76% of companies beating expectations, compared to an average of 79% over the past four quarters, according to data from LSEG IBES.
As in recent quarters, the results of Nvidia and a small group of other megacap tech and related companies are carrying the burden. The so-called Magnificent 7 companies, which also include Apple and Microsoft, are expected to have posted a 30% profit increase in the third quarter, compared with 4.3% for the other 493 companies in the index, said Tajinder Dhillon, senior research analyst at LSEG. .
“It’s actually the Mag 7 led by Nvidia that has done the heavy lifting to address the kind of earnings growth that has supported the progress we’ve seen in share prices,” Luschini said.
